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Simply Money: Protecting your money today, tomorrow, and in 2050

April 04, 2014

When financial advisors discuss investing, the concept of risk is an ever-present consideration.  It’s the tie that binds.

Yes, rate of return, growth projections, and asset accumulation are, of course, critical components, but they do not exist in a vacuum.  These numbers – no matter how impressive – only tell part of the story.  The necessary broader context must also take into account probability and – more importantly - protection.

Everyday protection

In practical terms, you do this everyday with your home and car. While there are many threats to the financial prospects of home ownership, the most significant is catastrophic loss, e.g., fire or natural disaster. So to mitigate this risk, you buy home insurance.  It’s your protection.  No one is ever “lucky” when a home is ruined and certainly there are emotional costs, but at least having home insurance shields you from fiscal devastation.  The same can be said for auto accidents resulting in significant injury and personal liability.  Without home and car insurance, fires and accidents can take every dollar you own.

The new reality

Unfortunately, some startling new data from the Alzheimer’s Association highlights the need to extend this style of everyday risk-management to your late-life health care.  More and more, it’s looking like the biggest threats to retirement portfolios are not volatile markets or Federal Reserve policy.  Big picture, the primary challenge will be preserving your nest egg from longer lives and more costly illnesses.

Today, over five million Americans are living with Alzheimer’s disease.  Because of the flood of Baby Boomers, this number is expected to triple, increasing to 16 million by 2050.  Alzheimer’s is on the rise while the death rates for other major diseases – cancer, stroke, and heart disease – are declining.  Age is the single greatest risk factor, and because of healthier lifestyles and advances in medical technology, we’re living longer. 

Alzheimer’s is the only cause of death among the top 10 in America that cannot be prevented, cured, or even slowed.  But the disease is not spread equally between men and women – nearly two-thirds of those with Alzheimer’s disease are women.  Women in their 60s are about twice as likely to develop Alzheimer’s over the rest of their lives as they are to develop breast cancer.  And not only are they afflicted more, 60 to 70 percent of unpaid Alzheimer’s caregivers are women.

Long-term protection

Perhaps the disease’s most daunting characteristic – from a care and financial perspective - is duration.  According to the Alzheimer Association, most people survive an average of four to eight years after a diagnosis, but many can live as long as 20 years with the disease. 

When it comes to paying for the type of care required for those with Alzheimer’s, Medicaid programs are only available to families below the poverty line, and Medicare covers very little.  For the rest, investors are left with two primary payment options: 1) Out-of-pocket until running out of money and qualifying for Medicaid; or 2) Protecting your portfolio with a long-term care policy. 

While the discussion of insuring your portfolio against the cost of illness is too vast to be adequately addressed within this article, the new Alzheimer’s data makes it imperative you have this discussion with a qualified financial advisor, preferably a Certified Financial Planner (CFP®).  As with your home, you may choose not to insure against the greatest risks, but at least you, your spouse, and family will be fully aware of the significant threats to the long-term sustainability of your savings and investments.


Nathan Bachrach and Ed Finke and their team offer financial planning services through Simply Money Advisors, a SEC Registered Investment Advisor. Call (513) 469-7500 or email simplymoney@simplymoney.net